Mobility Matters: The P2P Dustup

Pull up a chair and settle into watch the brawl because the coming fights over person-to-person payments are likely to be as brutal – and also as confusing – as just about anything recently seen in mobile banking.

There even are some who think this whole discussion is much ado about nothing, that consumers have zero interest in P2P.

But then there are others who see a huge market potential and, in particular, they see the potential for financial institutions to charge fees, at least for some kinds of P2P transactions, said Aleia Van Dyke, an analyst with Javelin Research.

“There are fee potentials for FIs,” she insisted in an interview.

Call this an unsettled landscape and you have that right.

The one point most players agree on: the mobile phone is what will give market share to P2P. Brookfield, Wis.-based banking technology company Fiserv recently brought out its trumpets to announce integration of its PopMoney P2P service into its mobility platform.

“We introduced this because for some time we have been hearing from our customers that they wanted the convenience,” said Steve Shaw, a Fiserv vice president.

Jacksonville, Fla.-based FIS now is talking about integrating its P2P product, Quick Pay, into its recently acquired mFoundry mobile app – but it also says it will make Des Moines, Iowa-based Dwolla’s P2P available inside mFoundry for those credit unions that prefer it.

At Malauzai, the Austin, Texas-based mobile banking app developer, CTO Robb Gaynor said his company was testing an innovative P2P solution he believed they would roll out in a few weeks. He added that Malauzai probably would soon offer an additional P2P choice to its customers. “Financial institutions are asking us for P2P, so we will provide it,” he said.

PayPal of course continues to chart its own P2P course; it gives away true person-to-person payments in most cases and it is widely viewed as the market leader.

Then there are the surprising facts that are emerging as the market matures. For instance: average payment size is $400, according to PopMoney, and that is multiples higher than the $5 or $20 pioneers had expected.

Two P2P transactions in three are for household expenses and the single most common payment is for shared cellular plans, again per PopMoney. There is much less talk of P2P employed to settle lunch checks because, frankly, that was always a silly notion. It’s simpler to fork over $10 in cash tomorrow than to settle immediately with P2P.

As for ages of users, they bifurcate. The 22-32 crowd leads the way, but the next biggest group is 44-54, according to PopMoney, which speculates many are parents of the younger users.

And that brings us to the money question: Exactly how big is this P2P market? Linthicum, Md.-based consulting firm First Annapolis pegs the P2P niche at $80 billion to $120 billion

But then there is a contrarian perspective, well voiced by Jeff Johnson, vice chair of the CUNA Technology Council and a senior vice president at the $1.8 billion BCU in Vernon Hills, Ill.

He is openly skeptical: “We don’t see a lot of demand for it. We considered implementing it but decided not to, at least for now. Where would you want to use it? I don’t see where.”

New research from Cincinnati-based payments processor Vantiv is no more encouraging. Its recent report included this about P2P payments: “42% of consumers (say) they are aware of mobile phone-based P2P money transfers, but just 4% (use) this method and 12% (say) that they are interested in it.”

Dean Seifert, a Vantiv senior vice president, conceded that the usage numbers are dismal but in an interview he indicated that some of it night be semantic, that consumers may in fact be using P2P without knowing that is what it is called.

Send $20 – perhaps via PayPal or PopMoney – to a child’s sports program and is that P2P? The consumer might not think so, said Seifert.

He added: “As more financial institutions offer P2P, more consumers will begin to use it. They will recognize it is safe, it is easy, and they will use it.”

At Financial Partners Credit Union, a $793 million institution in Downey, Calif., CEO Nader Moghaddam rolled out P2P – powered by PayPal – on the last day of January. Not quite two months into it – with essentially no promotion – the credit union has seen 102 money transfers involving around $7,000.

Is that good? Bad? Moghaddam said he is pleased because “this is raising awareness and usage of our mobile platform. To us, the key to P2P is it is another way for us to encourage usage of our mobile banking.”

Besides, he added, “We thought we had to have P2P.” Big banks have it – they advertise it – and so not having it just was no longer an option for Moghaddam in his Los Angeles market.